Clean Up City of St. Augustine, Florida

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What the Microsoft Antitrust Case Taught Us

Mr. Blumenthal is a Democratic senator from Connecticut. Mr. Wu is a law professor who who specializes in antitrust.

May 18, 2018

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The Microsoft co-founder and chairman, Bill Gates, spoke out against an antitrust suit in 1998.CreditDan Levine/Agence France-Presse — Getty Images

Twenty years ago today, Microsoft was sued by the Department of Justice and a coalition of 20 state attorneys general (including one of us, Mr. Blumenthal, of Connecticut) for violating federal antitrust law.

Microsoft, the world’s dominant software firm, and Bill Gates, the world’s richest man, faced a challenge from the upstart company Netscape and its internet browser, Netscape Navigator. The suit accused Microsoft of illegally protecting its operating-system monopoly and seeking a new monopoly for its own browser, Internet Explorer. The fear was that Microsoft would kill Netscape, monopolize the browser market and use that point of control to dominate the coming age of the web.

After a tough fight, the government won the case. There is now no browser monopoly, and the world has come to rely on the many apps, firms and ideas that were born after Microsoft’s control was broken. Microsoft has become a gentler giant, and Mr. Gates has become a philanthropist.

Yet it is worth remembering that at the time, challenging Microsoft was not a popular decision. Microsoft was a well-liked company and Mr. Gates was widely heralded as a visionary genius. Many, Microsoft most of all, argued that enforcing the antitrust laws against Microsoft would damage innovation and impede the economic growth fueled by the technology sector.

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This view turned out to be wrong. Innovation surged in the newly opened markets and the United States continued to spearhead growth in the technological world. The enduring lesson of the Microsoft case was that keeping markets open can require a trustbuster’s courage to take decisive action against even a very popular monopolist.

Imagine a world in which Microsoft had been allowed to monopolize the browser business. Holding a triple monopoly (operating system, major applications and the browser), Microsoft would have controlled the future of the web. Google, the tiny start-up, would have faced an unfair fight against Bing. Microsoft-Myspace might have become the default social network instead of Facebook. And who knows whether Netflix or any other online video service would have been started?

It took the power of law enforcement to rebut Microsoft’s claims that everything it was doing was pro-competitive, innovative and innocent. The discovery of candid internal company memos, a famously revealing deposition of Bill Gates and a full trial made it clear that Microsoft saw the internet as a major threat to its monopoly rule and was seeking to tame it.

The presiding judge, Thomas Penfield Jackson of the United States District Court for the District of Columbia, was right to propose that Microsoft be broken into two companies — one for the Windows operating system, one for other products. In the end, unfortunately, Microsoft was kept whole.

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Some limitations were placed on Microsoft’s behavior, such as a requirement that it share certain programming information with third-party companies. The appropriateness of that remedy is still debated. But what we do know is that the remedy pushed Microsoft to act with more caution, creating an essential opening for a new generation of firms.

It might seem like a cruel irony that the immediate beneficiaries of the Microsoft antitrust case — namely, Google, Facebook and Amazon — have now become behemoths themselves. But this is how the innovation cycle works: It creates room for saplings to grow into giants, but then prevents the new giants from squashing the next generation of saplings. (Microsoft was itself, in the early 1980s, the beneficiary of another antitrust case, against IBM, the computing colossus of its time.)

Which takes us to the present day. Unfortunately, ever since the Microsoft case there has been remarkably little oversight of the technology sector, despite the obvious signs of corporate consolidation and outsize market power. Enforcement of the antimonopoly laws has fallen: Between 1970 and 1999, the United States brought about 15 monopoly cases each year; between 2000 and 2014 that number went down to just three.

Antitrust efforts have become too fixated on the idea that the only real harm consists of raising of prices for consumers. Yet in the Microsoft case, Internet Explorer was “free,” even though Microsoft was bent on destroying competition with it. Today, both Google and Facebook offer products that are free. Society has grown to rely on them, but because they have no dollar price, antitrust regulators have been hesitant to take action.

Any American can tell you that there is no free lunch. Everything has a price. We pay for these products and services with our time and our data. And like Microsoft, these firms have come to exert too much control over our shared technological future.

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Mark Zuckerberg of Facebook testifying at a Senate hearing last month.CreditTom Brenner/The New York Times

At a hearing before the Senate, Mark Zuckerberg, the chief executive of Facebook, was asked to name Facebook’s biggest competitor — a company providing a similar service that consumers can go to if they are unhappy with Facebook. Mr. Zuckerberg could not name one. Part of the reason for this is that Facebook bought its most obvious competitors, Instagram and WhatsApp, and continues to acquire upstart companies before they can reach that point.

The pattern is familiar. And if the Microsoft case showed us anything, it is that we should not trust any one company to decide our future.

Richard Blumenthal is a Democratic senator from Connecticut. Tim Wu is a law professor at Columbia, the author of “The Curse of Bigness: Antitrust in the New Gilded Age” and a contributing opinion writer.

Sunday, May 20, 2018

The former top broadband adviser to FCC chairman Ajit Pai has been arrested on charges that she tricked investors into pouring $250 million into a phony fiber-optic scheme.

Elizabeth Pierce, who briefly served as chair of Pai’s Broadband Deployment Advisory Committee last year, was charged with one count of wire fraud on Thursday, and faces a maximum of 20 years in prison.

In August, the Federal Communications Commission said Pierce left for unspecified “personal reasons,” with Pai adding that she did “an excellent job” during her four-month stint at the committee’s helm and that he was “sorry to see her go.”

Last week, Geoffrey Berman, US Attorney for the Southern District of New York, said Pierce conned two New York-based investment companies by claiming that her company, Quintillion, had already nearly $1 billion in contracts for a fiber-optic system that would connect Alaska to the continental US.

“As it turned out, those sales agreements were worthless because the customers had not signed them,” Berman said. “Instead, as alleged, Pierce had forged counter-party signatures on contract after contract.”

Berman said the investors were left “with a system that is worth far less than Pierce had led them to believe.”

Quintillion said that it has been “cooperating fully” with authorities during the investigation.

Congressional Republicans and Democrats took turns blasting the idea of putting fossil-fuel development near the state's 825 miles of pristine beaches in order to boost energy production and oil company profits.

"Why should Florida suffer so they can make more money?" said Rep. Francis Rooney, R-Naples.

Rep. Alcee Hastings, D-Fort Lauderdale, and the Democratic co-chairman of the Florida's 29-member delegation, vowed to be the "last man standing against offshore drilling."

While Ken Lawson, president and chief executive of Visit Florida, the state's official tourism marketing arm, told lawmakers that the 2010 Deepwater Horizon explosion "will always serve as a stark reminder of what happens when we do not make our beaches, our waters and our environment our top priority."

BP's Deepwater Horizon oil rig exploded roughly 50 miles off the Louisiana coast in the Gulf of Mexico in April 2010, triggering an 87-day spill that released an estimated four million barrels of oil and gas. Along with 11 who died, 17 others suffered serious injuries and 115 people were evacuated from the rig, which sank.

The hearing comes as the Trump administration nears a decision on whether to allow seismic testing for fossil fuel deposits along the Atlantic Coast.

In January, the Trump administration dropped Florida from its plan to allow new offshore oil and gas drilling in most U.S. coastal waters.

The decision, in response to appeals from Florida Gov. Rick Scott, prompted calls for similar carve-outs from lawmakers in other coastal states like New Jersey, Delaware, Maryland and North Carolina. But similar exemptions have not been provided.

To cap off his 100 days in office, Trump signed an executive order that will expand offshore oil drilling in federal waters and open other areas that were previously off limits to new oil and gas exploration. McClatchyAP

Expanding offshore U.S. oil exploration is necessary to maintain America's ranking as the world's leading producer of oil and natural gas, said Ken Milito, director of upstream and industry operations for the American Petroleum Institute. Milito testified that even though the U.S. is a net exporter of oil, the country still consumes 18 to 20 million barrels per day.

"Moving forward, we've really got to look at where the opportunities might be for our industry to continue to provide" for the nation's increasing demand for oil and natural gas, Milito said.

The Trump administration has been sympathetic to those concerns, advocating for expanded exploration off the California coast, in the Arctic and in the Atlantic Ocean.

But environmentalists, business leaders and lawmakers along the Eastern Seaboard have rallied in opposition.

They fear that, if approved, seismic testing could lead to actual offshore drilling in the 330,000-square mile area of Atlantic Ocean from Florida to Delaware bay where the seismic testing has been proposed.

Representatives Vern Buchanan, R-Longboat Key, and Debbie Wasserman Schultz, D-Weston, have introduced the Marine Oil Spill Prevention Act that would extend a moratorium on drilling off much of Florida's Gulf coast from 2022 to 2027.

The bill would also make oil companies pay a greater share of oil-spill cleanup efforts and create a Gulf Coast Regional Citizens’ Advisory Council, that would work to avoid oil spills by tracking energy-industry activity and recommending safety practices.

Attorney General candidate Sean Shaw announced Wednesday that three state attorneys are backing his campaign for the Cabinet post.

The endorsements came in from Dave Aronberg of the 15th Circuit, Jack Campbell of the 2nd Circuit and Andrew Warren of the 13th Circuit. Each cited a different strong point in their statements backing the Tampa Democrat’s bid to replace termed-out Attorney General Pam Bondi.

“I’m endorsing Sean Shaw to be our next Attorney General because he has a proven track record as a fearless advocate for consumers and a financial watchdog for Florida taxpayers,” said Aronberg, also a former state Senator. “I’ve seen firsthand the devastating impact the opioid epidemic is inflicting on our communities, and I know that Sean Shaw will target those responsible for this epidemic and will help local prosecutors keep our streets safe.”

“I’m supporting Sean Shaw because we need a partner in the Attorney General’s office to crack down on those who seek to harm our children in our communities and over the internet. I look forward to working with Sean on this invaluable mission,” he said.

Warren added, “Over the last two years, I’ve had the opportunity to work hand-in-hand with Sean Shaw on common sense criminal justice reforms that keep our communities safe and offer second chances to those who deserve them. Sean has my endorsement because I know he will bring that same mindset of results-oriented reform to the Attorney General’s office. Floridians deserve a truly independent watchdog committed to ensuring equal protection under the law, and they will have that when Sean Shaw is elected Attorney General.”

Shaw is currently in his first term as a state Representative and is the leading Democrat in the Attorney General race. Before elected office, he served as the state’s insurance consumer advocate under former CFO Alex Sink. The state attorney endorsements follow a recent endorsement from the Florida Police Benevolent Association.

“I am extremely grateful for the support of State Attorneys Aronberg, Campbell, and Warren as we seek to return the power of the Attorney General’s office back to the people of Florida, where it belongs,” Shaw said. “I look forward to working with these highly respected members of law enforcement as Attorney General to fight back against the opioid epidemic, keep our children safe, and institute smart criminal justice reforms to make ensure fairness and equity for all those who come into contact with the law.”

Shaw faces Ryan Torrens in the Democratic Primary. Running on the Republican side are former circuit court judge Ashley Moody and state Reps. Jay Fant and Frank White.

Office chairs and affordable housing: Here’s what Ben Carson’s been up to

The Trump administration is doubling down on its efforts to undo Obama-era fair-housing policies in the wake of a lawsuit alleging that the U.S. Department of Housing and Urban Development had wrongfully suspended a requirement that communities address barriers to racial integration.

The tool, developed during the Obama administration, was meant to help communities comply with a little-enforced provision of the 1968 Fair Housing Act that compelled local governments to use federal dollars to end residential segregation.

But HUD on Friday said the tool was “confusing, difficult to use, and frequently produced unacceptable assessments.”

“We believe in furthering fair housing choice in our neighborhoods, but we have to help, not hinder those who have to put our rules into practice,” Anna Maria Farías, HUD’s assistant secretary for fair housing and equal opportunity, said in a statement. “We must make certain that our tools can facilitate the goals we all share — to build inclusive and sustainable communities free from discrimination.”

A 2015 rule required more than 1,200 communities receiving federal housing dollars to use the tool to assess local segregation patterns and draft a plan to correct them — or risk losing HUD funding.

The tool contained questions for local governments to answer, by referring to the data and maps provided by HUD, about policies and practices that influence housing patterns. In addition to analyzing residential segregation, communities were supposed to examine areas of poverty concentrated by race as well as disparities in accessing jobs and quality schools.

HUD Secretary Ben Carson had suspended that rule in January, prompting the lawsuit last week by a coalition of fair-housing advocates.

The agency says it is now seeking public input on how local governments could best promote fair housing choices while it reviews how it could make the assessment tool “less burdensome.”

Fair-housing advocates said the agency’s move to withdraw the tool is simply another way for HUD to suspend communities’ obligation to examine and fix residential segregation.

“They’re trying to achieve the same goal, just through a different avenue,” said Lisa Rice, president and chief executive of the National Fair Housing Alliance, one of three housing advocacy groups that filed the lawsuit. “They’re trying to get out from under the lawsuit. Instead of suspending the rule, they’re making the tool that communities use to follow the rule null and void.”

Rice had met with Carson prior to the lawsuit being filed to ask him to reinstate the 2015 rule and enforce it, to no avail.

Sasha Samberg-Champion, lead attorney on the lawsuit, said HUD's withdrawal of the very action being challenged in court doesn't "fundamentally change anything in the real world."

The Trump administration is still allowing local and state governments to receive billions of dollars in federal housing grants without demonstrating compliance with the full requirements of the Fair Housing Act, he said, despite HUD's claims Friday that its latest actions show its commitment to the 50-year-old law.

HUD directed communities to revert to what they were supposed to have been doing prior to the 2015 rule — self-certifying that they have analyzed impediments to fair housing and taken actions to address them.

But housing advocates said the retreat would perpetuate housing segregation, given earlier assessments by the Government Accountability Office, a bipartisan commission and HUD itself that the previous provisions were essentially toothless.

Carson, who has long criticized federal efforts to desegregate American neighborhoods as “failed socialist experiments,” said during his confirmation hearing that the 2015 rule compelled communities to look around for “anything that looks like discrimination.”

Carson has also come under fire recently for his proposal to at least triple the minimum rent that the poorest Americans pay for federally subsidized housing.